INVESTORS looking for hefty profits are driving the demand for residential properties in the Makati central business district (CBD), according to a real estate analyst said.
New residential projects being launched in CBDs are mainly targeted at investors rather than end-users, Julius Guevara, director for research and advisory at Colliers International, said in an interview.
“CBD areas, especially in Makati, have always been popular with investors… they’re mostly the investors [market]compared to the end-users because of the price point,” Guevara said.
In the past week, two residential projects were launched in the Makati CBD the Gentry Residences by Alveo Land Corp. and The Ellis by Megaworld Corp. Both are in Salcedo Village.
Claro Cordero Jr., head of Research, Consultancy, and Valuation at Jones Lang Lasalle Philippines, noted the newly launched residential projects were targeted at the upper market segment.
“The market positioning of the two developments is geared toward the mid-, high-end market, which we think at the moment remains healthy,” Cordero said.
The demand for residential properties in the Makati CBD remains strong, but only a small portion of demand comes from end-users,” said KMC Mag Group Managing Director Michael McCullough.
“End-user demand is kind of questionable. It might be around 10 to 20 percent, depending on the project,” McCullough said in a separate phone interview.
A driving factor for developers putting up residential projects in the Makati CBD is the fast turnaround of the units, McCullough noted.
“The sales are very, very quick if it’s a residential project in Makati. It can sell a lot fast,” McCullough said.
Cordero noted the Makati CBD has a premium and an edge over other business districts.
“We also think that Makati remains and will remain its premium edge against other locations due to the maturity of the real estate market and the presence of the various major and multinational companies and businesses,” Cordero said.
Another factor is the lifestyle.
“Makati CBD also remains a strong choice for the ‘live-work-play’ concept and will reinforce its popularity as a weekday home, especially after the completion of the major infrastructure developments in Metro Manila,” Cordero said.
However, the rising vacancy rates in the Makati CBD are quite noticeable.
In the first quarter of 2016, the vacancy rates rose to 9.6 percent with an estimated 3,660 units forecast to be added to the Makati CBD residential stock this year, according to Colliers.
“If you take a look at the rental market, because of the new supply that’s coming up, vacancy rates have been climbing. So it’s becoming a bit worry-some, considering that more and more units are being left vacant,” Guevara said.
Guevara noted, however, that the investors themselves remain optimistic about the market.
“On an investment perspective, I would say that the investors, they all know that real estate is typical. So probably by the time these new units are completed the ones that are being launched now the market may have corrected already,” Guevara said.